When a hybrid vehicle is operating in an electric mode and a transmission downshift is proposed, the energy losses that may occur when closing a disconnect clutch to start an engine after a downshift may be larger than the energy losses that would occur if the disconnect clutch was closed prior to the downshift to start the engine. In addition, the torque requirement after the downshift may be larger than the torque capability of the electric-machine that is powering the hybrid vehicle in the electric mode.